Shares in little known junior explorer Aura Silver Resources (TSXV: AUU; US-OTC: AUSVF) have been on the rise since Agnico Eagle Mines (TSX:AEM; NYSE:AEM) agreed to option into its 100%-owned Greyhound gold-silver project in Nunavut.
For the first three years of the agreement, Agnico could earn a 51% interest in 17 claims of the Greyhound property by making cash payments of $250,000 and spending $1.8 million in work expenditures.
Greyhound sits 35 km south of Agnico’s Meadowbank gold mine and can be accessed by the mine’s all-weather road.
Its proximity to this producing mine may be why Agnico is interested.
The junior staked the property in 2006. It comprises 24 claims, spans 22.6 sq. km, and is fully permitted for drilling.
Aura anticipates Agnico will soon kick off a drill program to test the gold and silver targets.
Aura’s CEO Robert Boaz said his firm is pleased to have Agnico as a partner.
“Given Agnico Eagle’s significant local presence and investment in area infrastructure and on-site personnel, their cost of drilling is anticipated to be significantly lower than any alternative Aura Silver could achieve,” he said in a statement.
If Agnico earns a 51% interest in the Greyhound property it can boost its interest to 70% over three years.
To do this, it could either fund a feasibility study on the property, or incur $5-million worth of work expenditures.
It would also have to provide Aura cash option payments of $100,000 upon exercising this option, and $150,000 a year later.
If any company’s interest in Greyhound falls below 10%, that interest would be exchanged for a 2% net smelter return royalty. The other company could buy half of that royalty at any time for $2 million.
After announcing the partnership on June 10, Aura’s shares rose 233% to close June 12 at 5¢.
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